FED PRICES FALL
TO $66-$64 BY CHRISTMAS
Prepared by Hales Cattle Letter
My Elusive Dreams
It has taken much longer for this market to believe and react to the negative aspects of heavy carcass weights and record large placements than originally expected. Fear of a severe winter resulting from the El Nino kept the futures at unrealistic premiums which helped to postpone the day-of-reckoning. Instead of seeing fed prices at $62 by December, as earlier expected, prices could fall to $60 during January and February, as a result.
Weights Could Accentuate 1998 Problems
The factors that caused last fall's steer carcass weights to drop 30 pounds below 1995 fall weights do not exist this fall. In fact, there have been forces at work this fall that have slowed marketings and may hold weights at higher levels than normal in early 1998. Consider what steer carcass weights 15 pounds above 1997 levels and 600,000 more fed cattle will do to beef production in early 1998.
120-Day Numbers Soar
After assigning marketing numbers of 100% to November and December, the resulting inventories of cattle on feed for 120 days or more is the largest since the wreck of 1973-1974. Not always an accurate indicator of near-term available supplies since the 120-day number is strictly a function of first-in-first-out without regard to the placement mix of calves and yearlings. When the inventory is corroborated by marketing projections based on placement weights and anecdotal feedlot reports (like this year), it becomes an accurate indicator of immediately available fed supplies.
Kill Reductions And Weather
If the fed supplies are as large as the indicators show, this week's kill cutback couldn't come at a worse time for the cattle feeder. With only one full slaughter week left until January, fed prices will either drop or December cattle will be pushed into January.
Weather forecasts call for little if any Arctic air blasts through early January. Temperatures are expected to be normal or above through December. No blizzards to bail out the bulls.
January Trial Date
The libel suit stemming from the Oprah show an mad-cow disease will be tried in Amarillo, in early January. Cattle feeders should be prepared for possible market volatility and pressure because media coverage will make mad-cow disease front page news once again.
December 12,1997 David Hales and Tom Horton
Hales Cattle Letter
P.O. Box 1623, Amarillo, Texas
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
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